May marks the start of wedding season. But while wedding bells are ringing, fewer and fewer couples are saying ‘I do.’ More couples are choosing cohabitation, but when it comes to money, tax and long-term financial security, skipping the aisle can be costly.
Tying the knot unlocks financial advantages – in particular, tax perks. These are benefits that unmarried couples simply don’t get, no matter how long they’ve lived together, regardless of shared bills, or how many children they share.
Being married – including civil partnership – provides tax-free allowances, inheritance tax benefits and clearer rules around the division of assets for partners and children, that cohabiting alone just does not offer.
Religion, culture, personal values and costs can all shape whether you want to get married. If cost is a big influence, you don’t need to have the big costly wedding. A no-frills ceremony at the registry office can cost as little as £200 – and could save you thousands over the course of your lifetime.
This article isn’t personal advice. Investments can rise and fall in value, so you could get back less than you invest. Pension, ISA and tax rules can change, and benefits depend on your circumstances. If you’re not sure if an action is right for you, ask for financial advice.
How marriage can reduce your tax bill and unlock valuable benefits
The marriage allowance
This is an easy way to shave up to £252 off your annual tax bill. It’s available to married couples where one of you is a non-taxpayer – perhaps taking an extended break from the workforce to care for children or earning under £12,570 annually – and the other partner is a basic rate taxpayer.
The non-taxpayer can apply to transfer up to £1,260 of their personal allowance to the partner earning more. This then increases the basic rate taxpayer’s tax-free allowance from £12,570 to up to £13,830. So they can earn a little more before starting to pay 20% income tax.
And it’s possible to backdate the claim up to four years, provided you met the criteria for each tax year in question. So, if you’re applying for the current tax year 2026/27, you could potentially backdate all the way to the 2022/23 tax year – that’s up to £1,260 to be claimed.
For the current tax year, the higher earner will simply pay less tax, and for any backdated years you’ll get a welcome tax refund that you can put to work towards your financial goals.
Tax-free savings and investment transfers
One of the biggest financial advantages of being married is that you can move savings and investments freely between each other without triggering a tax charge – something unmarried couples cannot do to the same extent. This gives you an extremely valuable tax planning opportunity, particularly if one partner is in a lower tax band.
Cash savings
Let’s start with cash. The personal savings allowance means that basic rate taxpayers can earn £1,000 in savings interest tax-free, higher rate taxpayers get a £500 allowance, and additional rate taxpayers do not get any.
This creates a simple opportunity. If one partner pays less tax, putting any cash outside of a tax-efficient wrapper in their name can significantly reduce the overall tax you pay as a couple.
(For Scottish taxpayers, the personal savings allowance is determined by the rest of UK tax bands).
Investments
It’s a similar story for investments. Everyone has an annual £3,000 capital gains tax (CGT) allowance, so using both partners’ allowances – and spreading the sales over multiple tax years – can significantly reduce your tax liability.
Who holds what really matters. Lower earners typically pay lower tax rates on savings interest, dividends and capital gains. So being strategic about who holds which asset can create big long-term savings.
Take dividends as an example: everyone gets a £500 tax-free allowance each year, but anything earned above this outside of tax-efficient wrappers is subject to dividend tax. The rate of tax you pay depends on your income tax band. It’s 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers.
The tax due on £100 of dividend income above the allowance could be as little as £10.75 for a basic rate taxpayer, or as much as £39.35 for a top rate taxpayer. So, shifting dividend-paying investments into the lower earner’s name can make a big difference to the tax paid. Of course, this kind of planning works only in a relationship built on trust because transferring assets does change their ownership.
Want to go one step further? Use your ISA allowances.
If you hold investments outside of ISAs, Share Exchange (sometimes called a Bed & ISA) lets you move them inside an ISA, sheltering future income and gains from tax. The process does involve selling and rebuying the investments, so do keep the CGT limits in mind, and there are a few other considerations to look into, too, before going ahead. Done carefully, couples can gradually move taxable investments into ISAs to keep more of their hard-earned money in their pocket.
ISA – the overlooked additional permitted subscription
This lesser-known ISA benefit – the additional permitted subscription – expands the surviving spouse’s ISA allowance by the total value of the deceased spouse’s ISA. This is on top of your standard £20,000 annual ISA allowance and applies even if the ISA is left to someone else.
Crucially, this provides an opportunity for any investments to be transferred into the surviving spouse’s ISA without being sold, so they continue to be exempt from UK income and capital gains tax - potentially providing the surviving spouse with a tax-free source of income in retirement.
Financial protection if things don’t work out
Nobody enters a relationship expecting it to end. But if it does, marriage and civil partnerships offer clearer financial protections than cohabitation.
One of the most overlooked assets in divorce is the pension - particularly if one of you has spent time out of the workforce caring for a loved one, leaving you with a much smaller pot than the other.
Being married or in a civil partnership means you may be able to claim a share of your partner’s pension, helping support your long-term financial security. Building a decent pension pot later in life can be done, but it’s much harder because there’s less time for compounding and often competing financial pressures.
Till death do us part – inheritance tax exemptions
For families looking to pass on wealth, marriage or civil partnership can make a huge difference to how much money goes to your family.
First, upon death the transfer of everything between spouses is free of inheritance tax (IHT). But the crown jewel is that married couples inherit each other’s unused nil rate bands, which could save their families a significant chunk of cash – especially given that inheritance tax is usually charged at 40%.
Everyone has a nil-rate band of £325,000, and anything unused can be passed to the surviving spouse or civil partner. Together, that means an estate up to £650,000 could be passed on IHT-free.
There’s more. The residence nil rate band – worth up to £175,000 per partner – which is available when passing the main family home to children or grandchildren – can increase the total IHT-free allowance to £1mn.
For cohabiting couples to achieve something similar, they’d have to plan carefully and may still end up paying more IHT than a married couple, regardless of how long they’ve spent building a life – and assets – together.
These rules will become particularly useful, as from April 2027 any unused defined contribution pensions become part of people’s estates for IHT purposes. It’s a shift that will see more estates pulled into the IHT net, so the exemptions offered to spouses and civil partners give valuable peace of mind.